Plunging Chinese rental yields point to property bubbles in major cities
In Xiamen, the city most at risk of a bubble, investors can expect to wait 100 years to recover their initial investment through rent
Home rental yields in Chinese cities, which at certain levels can signify a property price bubble, continued to fall in the past quarter.
The yields in 13 cities slipped below 2 per cent, suggesting an accumulation of risk in the market.
The rental yields in all the first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – dropped under 2 per cent, while nine second-tier cities joined them, according to Shanghai-based E-house China R&D Institute, which compiles the data for 50 cities.
The average yields are below the level in major global cities such as New York on 4.7 per cent and Tokyo on 4.3 per cent.
The coastal city of Xiamen recorded the lowest average rental yield of just 1 per cent, meaning investors can expect to wait 100 years to recover their initial investment if they solely rely on rent. Rental yield in Beijing touched 1.4 per cent, the lowest among the first-tier cities, meaning a property’s price is on average 71.4 times its annual rent.
